Middle-income… December 11, 2012

As a companion piece of sorts to the Backroom column in the SBP mentioned earlier today, how about this one about the working family from the same family. But not any working family, but the middle-income earners. Personally I’m curious as to what constitutes a middle-income earner, but there’s no clear definition provided by Martha Kearns the author of the piece. In fairness she notes that ‘A couple with two children will be down €240 a year on child benefit and probably be paying an extra €528 in PRSI between them (that would be on two wages each over €18k per annum).’ That sort of narrows it down a little, but even still. A bit of clarification would be handy. And there’s more, ‘They’ll also now have to fork out property tax (on a home with negative equity) of between €300 and €500 a year (twice for some of the more unlucky who are stuck with a second home from before they were a couple) and between an extra €10 and €126 on motor tax.’

All this is true, but it’s hardly the exclusive provenance of middle income earners. Those on more modest incomes will feel the pinch too. And those on no incomes at all.

When taking stock, most middle-income earners will admit that they can probably take most of these hits – for now. They can absorb them in a way that those close to, or below, the poverty line cannot.
They can cancel the Sky subscription, get rid of the home phone, get a cheaper package on their mobile phones, buy their children’s clothes in Penneys rather than Dunnes Stores, do the grocery shop in Aldi instead of Tesco, cancel this year’s family holiday, and/or reduce the number of presents under the Christmas tree.
It absolutely goes without saying that there are many categories of people who are more vulnerable and worse off financially than middle-income earners. Those will have some of these cuts outlined above and even more in the form of cuts in job-seekers allowances, increases in prescription charges for medical card owners and cuts to various pensions and disability allowances.
But middle-income earners should no longer have to apologise for their place in life – and surely have a right to be disgruntled. Most of them have spent years working to get to the point of having a modest quality of life.

No Sky subscription, pay as you go mobile, kids clothes in Penney’s, rarely if ever darkening the door of Tesco – welcome to my world, and there’s plenty much worse off then me, but it’s this idea that somehow those things constitute grand sacrifices when they’re the way many many of us live. Indeed some would say that these are essentially choices, and that those able to exercise that choice are – broadly speaking (obviously on an individual basis it may be different) – fortunate enough.

But that’s just the way it is for me, for one, the way it has been for years now, and long predating the boom. And what also irritates me is the idea that ‘most of them have spent years working to get to the point of having a modest quality of life’. So have we all. Anyone who draws a wage will have a similar experience. Many won’t have gone to college but started working straight from school. And so on, and so forth. Those who in the last few years have been tipped out of the labour market into unemployment. And those who never managed to carve out stable long term employment across the years. They’re somehow getting by on a basic level of income of €188 per week or €9776 per annum. There are other benefits that one may or may not be eligible for, but that’s the baseline.
She continues:

Despite earning decent wages, the fact is that many are no longer well-off, or anywhere near that, and are now just surviving, barely covering the bases.

But again, killing the Sky sub isn’t ‘just surviving’. Though it can potentially get much worse if that measure and others like it isn’t sufficient, and that too is the situation facing many (and arguably a potentially increasing number of) people. It is the constant focus on the middle that is so irritating.

It is interesting to consider what a political or policy response to this might be? And to what purpose? Lowering taxes is not sustainable – according to the orthodoxy, and to any serious analysis either. Much of the middle tends to access state services at various points in their lives, as do most citizens if you think about it – child benefit being one example, but there are others, yet expenditure cuts impact less rigorously upon them. Sure, one could do away with the CPA, but there’s a fair number of PS employees who are middle income earners too, and they pay taxes as well.

Moreover, all indications point to any supposed ‘savings’ being swallowed by debt repayments. So actual amelioration of the situation is well down the list of priorities.

At the end of the day, quality of life with one’s family – whether you are living in a mansion, a ghost estate, an apartment in negative equity or a council house – is what everyone wants. Yet, bit by bit, that quality of life is vanishing.
Minister for Public Expenditure and Reform Brendan Howlin loftily promised last week that people would prosper again – but for those in the middle-income bracket, clinging onto their jobs and their homes, it’s hard to see that day coming any time soon.

But why is it that somehow the plight of the middle is worse than those ‘close to, or below the poverty line’? Because if it isn’t worse then what is the purpose of the article at all?

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The key to it seems to be that middle-income earners, by virtue of their level of income (i.e. substantial but not excessive) and the various efforts made to gain it, are indeed more deserving of their wealth than those who have less, and earned less. The unspoken assumptions behind that is that mobility exists to a sufficient degree, and likely also that inequality of incomes (in the purest sense) is acceptable at least within the middle reaches of society. And once you make those assumptions, you have to maintain the outcome – hence worrying that those on middle incomes are losing ground. Even if those less well-off are losing more in relative terms, it’s a loss of status that most concerns people with vested interests in society as it stands. Interests which are opposed to significant redistribution or equality.

The key to it seems to be that middle-income earners, by virtue of their level of income (i.e. substantial but not excessive) and the various efforts made to gain it, are indeed more deserving of their wealth than those who have less, and earned less.

The point I think is more that if the state doesn’t allow middle-earners to keep enough of their own income to justify the efforts required to be a middle-earner then why bother?

The unspoken assumptions behind that is … that inequality of incomes (in the purest sense) is acceptable at least within the middle reaches of society.

Yes. Absolutely.

And just to be clear, that assumption runs right through our politics and civil society, including supposed left-wing groups such as the Labour Party and the trade union movement. When the latter talks about maintaining ‘relativities’, they speak not of Einstein.

Even the People Before Profit folks recognize it … their own TDs choose to pay themselves vastly different amounts, based IIUC on their previous earnings outside the Dail (circa €29k for Richard Boyd Barrett, whereas Joan Collins keeps over 50% more at circa €46k).

In fact, almost no-one in Irish politics is advocating for complete leveling of income. Vague aspirational statements about income equality are almost always followed by a pivot around the need to maintain relatively high PS salaries at all costs.

Ireland, Greece, Spain and… the US? These are the four countries that in the past four years have accumulated the greatest deficit as a % of GDP. The chart explains the scramble to force rates across the world to all time lows: a necessity to allow continued deficit funding, even if by doing so, the monetary authorities have made any economic growth impossible as true inflation (coupled with a rise in funding costs and government yields) is the last thing governments, locked in years more of deficit funding, can afford.

And while Europe is more or less toast due to a fixed currency, which means the only way it can grow its way out of the current mess which in turn would mean an internal devaluation resulting in 30-50% wage declines (as explained before), the US “can print its own currency” so as to preserve the myth that nominal wages are flat or rising. Of course, the concurrent external devaluation means the US will have to devalue the dollar (i.e., loss of purchasing power by those paid in USD). Relative to whom? Why Europe of course, which means the EUR will have to rise even more relative to the USD as the US “rebalances” its way out of its own deficit spending quicksand.

Alas, this takes us back to square one, as any external devaluation by the US would mean the internal devaluation in Europe will have to be even more profound, read even greater wage reductions, even greater social instability, and even greater cuts in the welfare spending. It also will mean even more and bigger bailouts in Europe, and a barage of endless lies and propaganda out of the unbearable Brussels-bsed circle of unelected Eurocrats.